Consumers Who Care About Cut: A Small, But Growing Group

June 1, 1997byRussell Shor

There’s a new breed of sophisticated diamond customer. Slightly more than 15% of retail jewelers say many customers asked for well-made diamonds in the past two years, based on a recent poll of the JCK Retail Jewelers Panel. Many of these customers are willing to pay more for a well-cut stone, compared with almost none five years ago. Not surprisingly, all of the jewelers reporting this phenomenon serve the upper-middle range of the market.

These consumers are better-educated and shop around much more than they used to, comparing the “look” of a diamond as well as the price. “That’s the difference today,” says Chris Heffern, a jeweler in St. Louis, Mo. “People are looking at more diamonds and they talk to more salespeople about cut or, as it’s called in the trade, make. It’s not long before they can see the difference between a stone that’s well-made and one that isn’t.”

The difference can be striking. Many megamarketers use mass-manufactured diamonds in which the proportions have been pushed to or beyond the limits of acceptability. This is done to derive maximum yield from the rough. But in the process, details such as finishing and facet alignments are sacrificed for expedience. This can make a diamond dull and lifeless, particularly those in the medium and lower colors.

Retailers agree that consumers who see the difference between a good cut and a “push” cut diamond often will spend the additional 15% to 25% for the better stone. The extra cost comes from the loss of yield. Ideal Cuts, for example, often suffer 10% to 15% greater loss in polishing than conventional rounds.

Consumers are learning about diamonds in several ways: in stores, through print and television stories and even on the Internet. Some have become sophisticated enough to ask about crown angles, table percentages and even ratios of fancy cuts.

Retailers say many consumers don’t fully understand the terms they throw around. But to ignore consumers’ growing sophistication is to endanger a sale. The bottom line, say retailers, is that consumers want to learn about diamonds, and the more they learn about cut, the better quality they’ll buy.

Sheldon Kwiat of Kwiat Inc., a major manufacturer in New York City, puts it in perspective: “Consumers who are willing to pay a lot more for a top-cut diamond are still a relatively small percentage of the whole. But they’re a group that’s growing quickly, and they’re influential.”

Gemological laboratories that issue cut grades or additional information on cut will help to push this growth even more, he says.

Manufacturers of Ideal Cuts – diamonds cut to proportions devised by Marcel Tolkowsky, the creator of the modern brilliant cut – have reaped the benefits of this trend. Lazare Kaplan International Inc., New York City, owns the Ideal Cut trademark and is the best-known manufacturer of such stones. It reported a 50% sales increase (to $266.3 million) in 1996. But this once-small market is rapidly filling with new players, including some contractors in Shanghai, China, that produce small goods for jewelry manufacturers.

Many, including researchers at the Gemological Institute of America, stress excellent cut is not limited to Ideal Cut proportions. But nearly everyone agrees companies making

Ideals pay much closer attention to the details that go into a well-made stone. Hertz Hasenfeld of Hasenfeld & Stein in New York City has seen his Ideal Cut business jump from 10% of sales a decade ago to 50% to 60% today. He estimates that Ideal Cuts can account for as much as 15% by value of diamonds over a half-carat sold today. A 1990 estimate put the number at 5%.

“It doesn’t take a trained gemologist to see that an Ideal Cut I SI1 can look much better than an F VS1 that isn’t well-made,” he says. “People no longer want to spend a lot of money on a diamond that has no life to it, even if it has a good color grade.”

The rules governing proportions of fancies aren’t as strict as those on rounds. But the differences between poorly made marquises, pears and the like can be much more striking, say diamond manufacturers. “There’s an enormous difference, and it’s usually obvious to the consumer if he or she sees a comparison between a nice cut and a poor cut,” Kwiat says. “The challenge is quantifying a good-cut fancy. The ratios – like 2 to 1 for a marquise, for example – are only a guide. It’s really up to the skill of the diamond-cutter to determine how to get the most life from a fancy shape.”

Demand for well-made melee and tiny pavé goods is also on the rise because jewelry manufacturers – even some Indian companies in the middle market – find their pieces sell much faster when the diamonds show more life. “You have to provide the look, even in pavé,” says Beny Aviram, president of Spark Creations, New York City. “Better jewelry will no longer sell if the diamonds don’t have a lot of life.”

Today’s move up in cut is an abrupt change from the U.S. market a decade ago. Then, consumers had a little knowledge of color and clarity and wanted to buy diamonds as cheaply as possible, often settling for off-makes. Diamond dealers, battling the mighty Japanese yen, were forced to take the leavings of the Japanese buyers, again largely off-makes.

Retailers who tried to maintain high standards complained bitterly that discounters deceived customers by offering poorly cut diamonds with good color and clarity grades at so-called discounts. “All they knew then was G VS. Cut never came into the discussion, so they could have gotten almost anything as long as it looked good on paper,” says one major retailer who has openly criticized GIA in years past for not adding a cut grade to its diamond grading reports.

Even as recently as two years ago, cut was still a non-issue to many consumers. But then the “value for money” concept began to take hold in U.S. retailing, and smart consumers realized they’d have to do some research to get the best buy.

The American Gem Society now issues its own diamond grading reports with cut grades, and GIA has added more information on cut to its reports. However, the labs have been somewhat co-opted by the Israeli-produced Sarin Diamension machine. The machine measures critical angles and percentages and assigns a cut grade, printed in a small label that goes right on the gem paper. “We first used the Sarin to select goods for the Japanese engagement ring market, where everyone wants excellent cuts,” says one Israel manufacturer. “Now we send a lot of the excellents to the States – we would have never thought of doing that two or three years ago.”

The Sarin unit can do hours worth of cut grading in a few minutes. Israeli manufacturers say this has made it possible to put more better cuts into the market because rough is analyzed instantly, showing the manufacturer how to get the most out of it while producing an attractive cut.

“The supply of good-make diamonds is much greater today because of this,” says the manufacturer.

Nevertheless, supply – not fashion – is what will control demand for well-made diamonds in the future. Most retailers and diamond manufacturers agree that increasing desire for well-made diamonds and Ideal Cuts is a permanent part of the market. Consumers are too well-educated to go back, and the trend is toward more cut information on diamond grading reports, not less.

“Many of today’s consumers are technically oriented and work with computers and other high-tech equipment. They can appreciate the perfection in a beautifully made diamond,” says Ernest Slotar, who markets South African-manufactured Ideals from his office in Chicago.

Demand for top cuts and Ideal Cuts may soon outstrip diamond manufacturers’ abilities to produce them. “These require a very skilled labor force, the best equipment and constant quality control to produce consistently,” says Hasenfeld. “Not everyone is equipped to make that much of an investment.”

Because of this and a limited supply of rough, Hasenfeld doesn’t foresee mass-marketers moving into Ideal Cuts. “They’re just too price-prohibitive for a price-point merchandiser,” he says.

Many up-market retailers feel vindicated. After years of promoting good cut as the “forgotten C,” the message is finally bringing in more business. However, they do see a downside to the story. Many worry they’ll lose their competitive advantage over the mass market if GIA and other major labs include cut grades on their grading reports. “That’s when drug stores will be able to sell diamonds in little plastic wrappers. There’ll be no knowledge required and no profits made because cut is the last thing keeping us from total commoditization,” says one retailer.